Snapchat User Growth Returns Thanks to Improved Android App
Snapchat ends a year of stagnant growth by reaching 190 million daily active users and beating Q1 2019 revenue expectations. However, rising cloud infrastructure costs threaten to delay the company's profitability goals.
Snapchat officially ends its year-long streak of flat or negative user growth by reaching 190 million daily active users in Q1 2019. This 2 percent increase from the previous quarter equals the total user additions of the past five quarters combined. The growth surge stems largely from the successful rollout of a completely reengineered Android app that is 25 percent smaller and 20 percent faster, prompting a 6 percent increase in Snaps sent from low-end Android devices within the first week of the upgrade.
The company reports $320 million in revenue for the quarter, which represents a 39 percent year-over-year increase and easily beats consensus estimates of $306 million. Snap successfully adds 1 million users in North America, 1 million in Europe, and 2 million in the developing world. Initially, this strong performance pushes Snap's share price up roughly 10 percent in after-hours trading to $13.11, continuing a significant rebound from a December low of $5.07.
Despite these positive metrics, Snapchat faces financial headwinds that potentially delay its goal of reaching profitability by the end of 2019. Increased user engagement drives up Amazon AWS and Google Cloud infrastructure bills, leading the company to project operating losses of $125 million to $150 million next quarter. Furthermore, international users generate significantly less ad revenue at $0.97 per user compared to $2.81 for North American users, meaning this new global growth currently costs the company more money than it makes.